DUALITY IN THE SPANISH LABOR MARKET AND THE CONTRATO EMPRENDEDORES

Transcription

1 DUALITY IN THE SPANISH LABOR MARKET AND THE CONTRATO EMPRENDEDORES Juan Luis Gimeno Chocarro Ministry of Employment and Social Security. Spain. Brussels, June 25, 2014

2 HIGH SHARE OF WORKERS IN TEMPORARY CONTRACTS Average share of temporary workers in the EU, Eurostat 2013 average (%) Poland Spain Portugal Netherlands Cyprus France Slovenia Sweden Finland Euro area Croatia EU28 Germany Italy Hungary Greece Ireland Austria Czech Republic Denmark Belgium Malta Luxembourg Slovakia United Kingdom Bulgaria Latvia Estonia Lithuania Romania Duality in the Spanish labor market and the contrato emprendedores 2

3 SOURCES OF LABOR MARKET SEGMENTATION Is Spain cursed with duality? Sectoral composition of the Spanish economy. Weight on GDP of tourism, commerce, agriculture and its industry, etc. Reverse causality plays an important role. Rigidity of labor market: lack of internal flexibility, collective bargaining not adapted to markets needs. Part-time jobs rigidity and lack of use. Labor market institutions explain duality Gap in severance payments: 33d/24m; 20d/12m vs. 15days. Free riding to avoid social security contributions. Temporary jobs as stepping stones: use as trial periods. Information problem. The role of advisors to firms in labor legal issues. Temporary jobs in the public sector. Duality as a complex issue. Other sources of segmentation Credit restrictions: permanent workers as an investment. Size of firms and implications. Limited competition in good and services markets. Duality in the Spanish labor market and the contrato emprendedores 3

4 MEASURES RECENTLY UNDERTAKEN TO TACKLE DUALITY Foster internal flexibility Collective bargaining closer to the ground LABOR MARKET REFORM 2012 Clarification of causes for a fair dismissal Lower unfair severance payment Full reform of collective dismissals Contrato emprendedores Reintroduction of max. 2y temporary contract PART-TIME JOBS REFORM CONTRACT REGISTRATION PLAN TO FIGHT AGAINST FRAUD FLAT TAX RATE More flexible distribution of working time. Limited restrictions from sectoral collective bargaining New online registration procedure that lowers information problems through an intuitive decision tree. Decisive action to tackle free riding (unjustified excessive rotation) 100 /month social security flat tax rate for permanent contracts. Only stable empleoyment is subsidized. Duality in the Spanish labor market and the contrato emprendedores 4

5 2007Q1 2007Q2 2007Q3 2007Q4 2008Q1 2008Q2 2008Q3 2008Q4 2009Q1 2009Q2 2009Q3 2009Q4 2010Q1 2010Q2 2010Q3 2010Q4 2011Q1 2011Q2 2011Q3 2011Q4 2012Q1 2012Q2 2012Q3 2012Q4 2013Q1 2013Q2 2013Q3 2013Q4 EVOLUTION OF DUALITY DURING THE CRISIS Share of temporary jobs during the crisis (%). Spain (EPA) Involuntary temporary employment share Share of employees (15-64) in temp empl contracts female employees male employees total employees total employees total employees total employees Duality in the Spanish labor market and the contrato emprendedores 5

6 CONTRATO EMPRENDEDORES. MAIN FEATURES Permanent contract with four special features: Only for SME (50 workers or less). One year probationary period with no dismissal costs. Linked to generous hiring subsidies that lower Social Security contributions and tax rebates. Full time (initially) and part-time jobs (Dec 2013). Collectives: hiring subsidies (cover around 100% of Social Security contributions) and tax rebates: Workers under 30y. and workers older than 45y. More generous for women. Benifitiaries of unemployment subsidies (wage compatible with subsidy). Additional requirements: No unfair dismissals in prior 6 months. Hiring subsidies and tax relief: Maintain job for 3y (worker)/ 1y (workforce). Duality in the Spanish labor market and the contrato emprendedores 6

7 CONTRATO EMPRENDEDORES. MAIN RESULTS Number of contracts: (first week of June) that represent 20,2% (one fifth) of total permanent contracts of SME in the period. Around 40% are linked to hiring subsidies and tax rebates (58% in younger workers) More incidence in men (60%). 43% younger than 30y workers. 80% low and medium skilled workers. OECD REPORT (December 2012). The 2012 labour market reform in Spain: a preliminary assessment: The probability for the unemployed of being hired on a permanent contract has increased by 24%, on average, during the first 6 months in unemployment. The estimated percentage effect is even greater at longer unemployment durations. The econometric models estimated for this report suggest that at least new permanent contracts per month in firms with 50 employees or less can be attributed to the 2012 reform. Source: OECD A factor that is likely to be behind this upsurge in hiring on permanent contract is the introduction of the contrato emprendedores, which de facto extended the trial period for firms with less than 50 employees. Duality in the Spanish labor market and the contrato emprendedores 7

8 Analysis of survival rate shows: CONTRATO EMPRENDEDORES. SURVIVAL RATE Survival rate is very similar to that of ordinary permanent contracts. Hiring subsidies increase survival rate after one year around 10 p.p. Survival rate is larger in men and very similar with regard to younger workers. Job destruction between 12th and 13th month is almost identical to that of other permanent contracts in spite of the severance payment gap (from zero to 20/33 days). Survival rate differences between CAE and permanent contracts stabilize after 8 months. Survival rate of CAE and ordinary contracts 100% 90% CAE Permanent 80% Temporary 70% 60% 50% 40% 30% 20% 10% 0% m-0 Source: MEYSS m-1 m-2 m-3 m-4 m-5 m-6 m-7 m-8 m-9 m-10 m-11 m-12 m-13 m-14 m-15 m-16 m-17 m-18

9 CONTRATO EMPRENDEDORES. QUESTIONS Are dismissal costs so important to explain the duality problem? An increse from zero to 20/33 days severance payment does not trigger dismissals. Other costs linked to excessive rotation: selection of workers, training costs, cohesion of the workforce, uncertainity, etc. Are probationary periods in Spain too short? OECD recommendation: extend one year probationary period. Problems with the extention of probationary period to every permanent contract. Why are there SME that do not hire through CAE? Are hiring subsidies an efficient ALMP? Duality in the Spanish labor market and the contrato emprendedores 9